Lean information flow

As, there are two approaches to the implementation of production processes, there are also two approaches for information flow: the push and the pull system. In the most radical form of push information flow, material flow triggers the information flow. It is pushed strictly on commands coming from the control center to each successive element of the production chain (Voronin 2010) as shown on figure 11 below.

Control center

Information on current

situation Information reception

Process 1 Process 2 Process 3 Process 4

FIGURE 11: PUSH SYSTEM INFORMATION FLOW

According to Voronin (2010), this system has some drawbacks:

1. inability to respond quickly to changing situations as due to internal reasons and because of need for continuous adjustment of the centralized planning of production;

2. the need for excess insurance stocks, which increases total costs (in this case by insurance stocks, we understand the excess number of employees);

3. inability to fully optimize plans due to lack of opportunities to take into consideration all the circumstances that may affect these plans;

4. the need for constant increase of the complexity of information processing systems and personnel qualification considering the growing number of factors that should be taken into account when planning;

5. the need to create large units for planning of situation and a timely response to the changing of situation.

However, these disadvantages are corrected in the pull system. In a pull information system, known as lean information flow, the information flow is pulled by followed element from the previous when it is ready, but not on command from the center (Voronin, 2010). In this case, the main features of the system are the horizontal linkages and delegation of authority to make decisions at the level of teams or small groups of workers (the ones doing the work). The result of the implementation of pull system is a system, which provides "just in time" service, while the value of total costs is reduced significantly.

Another system that can be applied to lean planning processes and highlight the role of information in planning is the method of synchronous processes. It provides the necessary elements to support lean information flow in the organization.

The method of synchronous processes was developed based on the Theory of Constraints of Goldratt. This theory indicates that the effectiveness of any system is determined by its most inefficient parts. To highlight these parts, all system resources are divided into insufficient (bottlenecks), limited and excess capacity. The evaluation of the resources is carried out by applying a system of "drum-buffer-rope" in the following sequence (see figure 12)

A B C D E F

Customers

Rope 2 Rope 1

Buffer Drum

FIGURE 12: DRUM BUFFER ROPE

1. Function of the drum that gives rhythm to the processes to analyze the information is entrusted to the limitations of the system. An option for limiting can be a resource, which capacity is limited because of deficiencies in the organization.

2. Plans to maximize the efficiency of limitations of the system are determined. To maximize the efficiency of "tight" resource, a buffer is created before it, that is, a reserve stock that can provide a constant load of insufficient product.

3. The whole system is set up to implement these plans (even if this reduces the effectiveness of redundant components). To do this the optimal value of amortization stock based on statistical data is determined, to makes sure that the drum will work all the time, not depending on the problems arising in processes before it.

4. Effect of restrictions is successively decreased. For this purpose, there are two ways: either buy another similar resource, or gradually increase the capacity of the existing resource.

5. Defining the following restrictions and repeating steps described above (Voronin, 2010).

This approach permits to have available information on time and submit the whole activities in the organization to the availability of the required information.

From the above we can say that efficient information flows in an organization is one of the keys to effective performance. Thereby lean organization of information flows helps to optimize organization's activities. It happens through detailed analysis of flows passing through departments and the restructuration of these flows. The main problem, which should be eliminated, is the high level of uncertainty in offshore shipbuilding industry.

Thus, a good decision-making requires using and securing high quality and complete information (Gordon, 1993). This to illustrate the fact that shipbuilding professionals are facing a high risk of making key decisions that can become unproductive due to market uncertainty and causes beyond their control. However, an effective information exchange can help to reduce this uncertainty. In shipbuilding, an effective information exchange and processing system will help for a better coordination of all the activities in the engineering disciplines and between engineering, procurement and construction. This coordination can help to achieve concurrent processes and concurrent engineering. Recall that concurrent engineering is a systematic approach that integrates the designs of products and the related processes including engineering, manufacturing, construction and support (Pennell and Winner, 1989). It integrates all the elements in the product life cycle from the beginning. Concurrent processes are one of the possibilities to cope with errors and potential reworks in the engineering activities while taking in account customers’ value expectation. It is based on the idea that it is important to face accurately the fast-changing market place and to avoid costly rework in the production stage by focusing on coordination and accurate information exchange between all the departments. Therefore, all the activities should be integrated so that there is constant and accurate overview of the process. The most important condition to achieve this concurrent process is an integrated and effective information exchange system between the different actors (see Figure 2).

Another importance of effective information exchange in organizations is that it is one of the key elements to take in account when implementing new processes.

As STX-OSV Søviknes is now implementing lean planning in the yard, a good communication between the management and the employees helps to reduce a lot the resistance to change even if it does not completely take it away. Moreover, when the employees feel a sense of gratification and ownership over their work, they tend to work harder and are more engaged because they have a say in the general process.

2.2.3 Summary

To summarize, we notice that the lack of information creates uncertainty.

To secure an effective flow of goods in the supply chain, to tackle more effectively uncertainty in shipbuilding, to establish concurrent processes, to implementing new

concepts; it is necessary to have an effective information flow among the different actors in the organizational chain. Moreover, an accurate and effective information exchange and processing is one of the key to reduce uncertainty and simultaneously increase employees’ involvement and their sense of ownership. All stated above leads us to discuss what prevents organizations from using lean information flows (inside the company and along the supply chain) and lean planning systems that are proved to be more effective, efficient and optimal. One of the reasons, that we will analyze, is human factor in decision-making under uncertainty. Decision-making is the area of professional activity, which involves mostly people therefore creating a risk of errors. In the next sections, we will analyze how methods of decision-making are implemented in order to optimize the overall process of decision-making and how behavioral psychology can influence this process.

2.3 – Decision-making under uncertainty

Decisions have to be made at different levels in the organization and by different people. We can identify two main types of decisions: programmed decisions and non-programmed decisions (Gordon, 1993).

Programmed decisions are the ones that address relatively structured and repetitive problems. The decision maker’s experience in making such decisions facilitates the process and increases the likelihood to have the expected outcome. Non-programmed decisions are unstructured and most of time new and unique. They can be problematic and challenging and require innovative solutions. Non-programmed decisions require time to gather information, expertise to address accurately the problem and creativity to find innovative solutions (ibid). The organizations and decision-makers are performing in a dynamic world. This may increase the complexity of the processes and reduce people’s ability to predict the outcome of their decisions. It reduces also their ability to gather all the information required to make their decisions. Therefore, they make decisions under uncertainty. This is the case in offshore shipbuilding where non-programmed decisions are made frequently, especially in planning and engineering.

People have to adapt to changing customer requirements, supplier uncertainty and to

changing regulations. They have to find innovative solutions and make decisions before gathering all the relevant information.

Uncertainty can be defined as the lack of predictability of outcomes meaning that we do not know for sure what will happen (Wallace, 2005). It is the difference between information required to make a good decision and the information available when the decision is made. This difference is characterized by a lack of required information, lack of control over the problem and lack of knowledge over the problem’s characteristics. The decision makers face two types of uncertainty: external uncertainty and internal uncertainty.

 External uncertainty (weather conditions) is the one out of control of the decision makers. It cannot be control and it does not make sense to collect information to try to overcome it. The objective of the decision maker in this case is to create flexibility in the process. That will allow him to cope with the uncertainty. Stochastic modeling, utility theory and options theory are use to provide flexibility in case of external uncertainty (e.g. weather condition).

 Internal uncertainty (e.g. lack of needed technical documentation) can be controlled. It refers to ignorance and lack of knowledge. The decision maker can get rid of internal uncertainty by buying or collecting relevant information.

The decision-makers’ objective is to reduce or eliminate this uncertainty by investing in the search for information or create flexibility to adapt (Wallace 2005). Figure 13 illustrates the different types of uncertainty and the objective of the decision makers in each case.

FIGURE 13: DIFFERENT TYPES OF UNCERTAINTY AND METHODS OF CONTROL

Although, external uncertainty cannot be totally controlled, different approaches permit to cope with it. Theories like operation research, options theory and utility theory combined with heuristics and behavioral psychology provide tools to cope with it. In offshore shipbuilding, the introduction of flexibility in design, drawings and 3D modeling can be done by using a common platform for several ships. The use of a common platform at the beginning of the process permit to focus on cost reduction. The late customer requirements are introduced in a later stage during the outfitting. This postponement of the final requirements is a source of flexibility, which can help to reduce the effect of uncertainty in the process and avoid costly reworks. The introduction of flexibility in design illustrated in figure 14 presents how the uncertainty can be handled at this stage.

METHODS OBJECTIVE s

TYPES

UNCERTAINTY

INTERNAL

Reduce or eliminate the uncertainty create flexibility to adapt

Collect or buy relevant information Update knowledge EXTERNAL

Create flexibility

Operation research Utility theory Option theory

Outfitting preferences

Customer preferences are revealed

Operation research, option theory and utility theory are mathematical approaches, which permit to avoid the risk of biases. The next sections will introduce heuristics and behavioral psychology and mathematical decision-making theories.